Press Release

VIS Assigns Initial Entity Ratings to Premier Agencies
 

Karachi, December 31, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B Plus /A-Two) to Premier Agencies (PA). The long term rating of BBB+ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable with possible changes in the economy. The short term rating of ‘A-2’ signifies good certainty of timely payment; liquidity factors and company fundamentals are sound. Risk factors are small. Outlook on the assigned ratings is Stable.

Premier Agencies (PA) is a partnership concern engaged in the distribution of Pharmaceutical Products, FMCG Products, Stationeries, Cosmetics and Toiletries. It is a part of Premier Group of Companies, a group which has diversified business interests in the textile, pharmaceutical and FMCG sector.

The assigned ratings incorporate extensive outreach of the company across Pakistan as indicated by its widespread and growing network of warehouses and vast coverage of customer touch points. Ratings also reflect company’s exposure to considerable number of principals operating in diverse sectors including pharmaceutical, healthcare and FMCG segments. PA has a well-designed organizational structure with a risk management and internal audit function in place. Internal controls are also considered adequate. However, corporate governance framework depicts room for improvement.

Business risk profile derives support from diversified operations and presence in high growth segments. Around 65% of company’s the revenues emanate from segments that have a long history of steady demand growth through economic cycles. PA’s exposure to top-tier clients who have had an established track record over the years of outperforming peers in terms of revenue growth bodes well for future sales of the company. Although total number of principals is sizeable, customer concentration risk is considered to be on the higher side. This risk is partly mitigated with most large clients having a long association with the Company and high switch over cost for clients. Ratings also factor in fragmented and competitive nature of the distribution industry resulting in low margins and pricing power for industry players.

Assessment of the financial risk profile indicates robust growth in topline during the last three years along with healthy sales growth outlook, going forward. Volumetric increase was the primary driver of growth in topline. Despite significant topline, net margins are considered limited due to sizeable overhead expenses and finance costs. Going forward, growth in topline is projected to offset higher finance cost and increase in administrative expenses. Equity base has registered sizeable growth on a timeline basis due to profit retention, induction of capital and interest free loan from family members. Leverage indicators are considered to be on the higher side due to sizeable short-term borrowings. Liquidity profile is constrained in view of limited cash flows; however, comfort is drawn from satisfactory coverage of short term borrowings from stock in trade and trade debts. Going forward, maintaining leverage indicators is considered important from ratings perspective.

For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext: 201) at (021) 35311861-66 or email at info@vis.com.pk.


Javed Callea
Advisor

Applicable Rating Criteria: Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

________________________________________________________________________________________________________________________________
Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited